Feeney v Southstar Homes Pty Ltd - [2024] VSCA 153

SUPREME COURT OF VICTORIA COURT OF APPEAL
S EAPCI 2023 0102
BRENDON FEENEY	First Applicant
and
NICOLA SOFIA KARAKATSANIS	Second Applicant
v
SOUTHSTAR HOMES PTY LTD (ACN 096 297 022)	Respondent

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JUDGES:	McLEISH, NIALL JJA and OSBORNE AJA
WHERE HELD:	Melbourne
DATE OF HEARING:	16 April 2024
DATE OF JUDGMENT:	28 June 2024
MEDIUM NEUTRAL CITATION:	[2024] VSCA 153
JUDGMENT APPEALED FROM:	[2023] VCC 1420 (Judge Cosgrave)

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CONTRACT – Application for leave to appeal – Construction of settlement deed – Whether outstanding balance of settlement sum payable in event that full amount not credited through work in kind – No obligation to pay outstanding balance in absence of default – Non-payment of balance where no further engagement does not constitute ‘default’ – Whether judge erred in finding implied term requiring payment of balance of settlement sum – No implied term – Whether judge erred in finding subcontractor ‘engaged’ on future project within meaning of deed – Leave to appeal granted – Appeal allowed.

WORDS AND PHRASES – ‘default’ – ‘engage’.

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Servcorp WA Pty Ltd v Perron Investments Pty Ltd (2016) 50 WAR 226, considered.

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Counsel
Applicants:		Mr D Collins KC with Mr B Petrie
Respondent:		Mr A Dinelli KC with Mr L Freckelton
Solicitors
Applicants:	Rigby Cooke Lawyers
Respondent:	Baker Jones

MCLEISH JA
NIALL JA
OSBORNE AJA:

Introduction

This application for leave to appeal from orders made by a judge of the County Court concerns the construction of a settlement deed entered into in the context of a building dispute between a builder (‘Southstar’, the respondent) and its subcontractor, Form8 Constructions Pty Ltd (‘Form8’) (‘Settlement Deed’). That dispute was resolved on terms which included a payment by Form8 of $345,000 (excluding GST) (‘Settlement Sum’). The critical issue in the case is whether that amount was to be paid by Form8 by way of credit against future subcontracts with Southstar, or whether it was payable even in the absence of such subcontracts.
The judge held that the Settlement Deed included an implied term which, in very rough terms, provided that the whole Settlement Sum was due and payable if there was a failure to provide credit for the full amount of $345,000. The judge held that Form8 was liable to pay the full amount, had failed to do so, and that the applicants, who were the director and construction manager at Form8, were liable under a guarantee contained within the Settlement Deed.
The applicants contend that the judge was wrong to imply the term. By way of a notice of contention, Southstar argues that Form8 was never engaged on a future subcontract and therefore the settlement payment was payable in any event, in instalments which had not been paid, constituting a default and rendering…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] VSCA 153
Decision Date: 28 June 2024

CaseChat Overview and Summary

In the Federal Court of Australia, the plaintiff, Feeney, brought a proceeding against Southstar Homes Pty Ltd. The dispute revolves around the interpretation of a settlement deed. Feeney alleged that he was entitled to an outstanding balance of a settlement sum, which was not credited through work in kind. Southstar Homes argued that there was no obligation to pay the balance as there had been no default by Feeney. The primary judge found that there was an implied term requiring payment of the balance of the settlement sum and that Feeney was engaged on a future project within the meaning of the deed.

The legal issues before the court were whether the primary judge erred in finding an implied term requiring payment of the balance of the settlement sum, and whether the primary judge erred in finding Feeney was engaged on a future project within the meaning of the deed. The court considered authorities such as BP Refinery (Westernport) Pty Ltd v Shire of Hastings, Codelfa Construction Pty Ltd v State Rail Authority, Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd and Servcorp WA Pty Ltd v Perron Investments Pty Ltd to determine the correct interpretation of the settlement deed.

The court found that the primary judge had erred in finding an implied term requiring payment of the balance of the settlement sum. The court held that there was no obligation to pay the outstanding balance in the absence of a default by Feeney, and that non-payment of the balance where no further engagement occurred did not constitute a ‘default’. Additionally, the court found that the primary judge had erred in finding that Feeney was engaged on a future project within the meaning of the deed. The court concluded that the primary judge’s findings were not supported by the evidence and that the settlement deed did not impose an obligation on Southstar Homes to engage Feeney on a future project. As a result, the court granted leave to appeal and allowed the appeal.

The court ordered that the appeal be allowed and that the orders of the primary judge be set aside. The court also ordered that the parties bear their own costs of the appeal.

Orders